At the urging of a friend I scheduled a golf lesson last weekend. The instructor patiently watched as balls ricocheted left and right off my 8 iron. With a grunt, he disappeared. I was about to humbly pack up my equipment when he returned with a sack of sand and threw it out onto the range mat in front of me. “Swing into that bag of sand”, he said. I hit the sand with my club a few times before he replaced it with a golf ball and instructed me to hit the ball as if the bag of sand was still there. With a distinct “whack” the ball went sailing off the sweet spot of my club, high in the air and straight towards my target.
Apparently, instincts were working against me as my mind tried to figure out a way to lift a golf ball high and far away. The more I tried to lift the ball into the air, the more power I lost. More importantly the angle was all wrong, thus mitigating the design features of my club. Hitting down into the ball as if it was a sack of sand was the only way I was going to get the ball airborne consistently.
Hitting a golf ball is a complex problem that instincts cannot solve. There are many things like this in the modern world we live in. Long term investing definitely falls into the “complex” category. We invest because we know we need return on our money in order to achieve our goals, but the feedback we get in the short run is frustratingly inconsistent. As humans, we instinctively look for clues around us. In the media and our daily life, our own biased opinions are formulated around incomplete and many times inaccurate information.
Good, experienced investment advisers make sense of all the noise. Advisers know the tools of the trade just like a PGA instructor knows how a golf club is designed to be struck. What appears to be inconsistent return to an investor many times makes perfect sense to a pro who understands the dynamics of the market.
Wise advisers do not trade on predictions, rather they create portfolios to perform satisfactorily under a multitude of potential market conditions. A portfolio, just like a golf club, is designed to be used in a specific way. Many times investors want to instinctively make changes to their portfolio based upon misinterpretations of the situation. This is similar to the frustrations I experienced when trying to “lift” a golf ball in the air. Hitting down on a golf ball in order for it to fly high in the air will never make sense to me. Likewise I am sure the daily ups and downs of a portfolio many times do no translate well into the projected real returns we all hope to enjoy. In complex scenarios our instincts can get the best of us.